Suppose in month t the annual nominal interest rate is it = 0.02 in the United...
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Suppose in month t the annual nominal interest rate is it = 0.02 in the United States and it = 0.05 in Germany. Suppose further that in month t a speculator invests 400 million dollars in carry trade for one month. Let Et be the nominal exchange rate in month t, defined as the dollar price of one euro. Suppose that between month t and month t+1 the dollar appreciates by 2.8 percent. Find the payoff from the carry trade. Express your answer in dollars. Suppose in month t the annual nominal interest rate is it = 0.02 in the United States and it = 0.05 in Germany. Suppose further that in month t a speculator invests 400 million dollars in carry trade for one month. Let Et be the nominal exchange rate in month t, defined as the dollar price of one euro. Suppose that between month t and month t+1 the dollar appreciates by 2.8 percent. Find the payoff from the carry trade. Express your answer in dollars.
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Calculating the Payoff from the Carry Trade Steps 1 Exchange Rate Change Between month t and t1 the ... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
Posted Date:
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